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Discount Rates for Economic Appraisal of Public Sector Expenditures

Author

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  • Glenn P. Jenkins

    (Department of Economics, Queen's University, Kingston, Canada and Eastern Mediterranean University, North Cyprus)

Abstract

The question of what is the appropriate discount rate to employ in public sector investment appraisal has been the subject of a theoretical debate in the economics literature for over a decade. In recent years, however, most of the points of disagreement in the theory have become better understood and hence a large degree of reconciliation has taken place. Central to this controversy was whether the appropriate parameter to use as the social discount rate should be the social value of the marginal product of investment in the private sector, the social rate of time preference or the social opportunity cost of capital. This paper presents the different arguments on the Discount Rates for Economic Appraisal of Public Sector Expenditures.

Suggested Citation

  • Glenn P. Jenkins, 1980. "Discount Rates for Economic Appraisal of Public Sector Expenditures," Development Discussion Papers 1980-14 Publication statu, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:5504
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    References listed on IDEAS

    as
    1. Sandmo, Agnar & Dreze, Jacques H, 1971. "Discount Rates for Public Investment in Closed and Open Economies," Economica, London School of Economics and Political Science, vol. 38(152), pages 395-412, November.
    2. Dreze, Jacques H, 1974. "Discount Rates and Public Investment: A Post-Scriptum," Economica, London School of Economics and Political Science, vol. 41(161), pages 52-61, February.
    3. Sjaastad, Larry A & Wisecarver, Daniel L, 1977. "The Social Cost of Public Finance," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 513-547, June.
    4. Martin Feldstein & Lawrence Summers, 1983. "Inflation and the Taxation of Capital Income in the Corporate Sector," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 116-152, National Bureau of Economic Research, Inc.
    5. Kenneth J. Arrow & Robert C. Lind, 1974. "Uncertainty and the Evaluation of Public Investment Decisions," Palgrave Macmillan Books, in: Chennat Gopalakrishnan (ed.), Classic Papers in Natural Resource Economics, chapter 3, pages 54-75, Palgrave Macmillan.
    6. M. T. Sumner, 1980. "Benefit-Cost Analysis in Canadian Practice," Canadian Public Policy, University of Toronto Press, vol. 6(2), pages 389-393, Spring.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Anonymous, 1981. "Introduction [The Social Discount Rate for Canada: A Further Analysis]," Canadian Public Policy, University of Toronto Press, vol. 7(3), pages 378-380, Summer.
    2. Claude Montmarquette & Iain Scott, 2007. "Taux d'actualisation pour l'évaluation des investissements publics au Québec," CIRANO Project Reports 2007rp-02, CIRANO.
    3. M. T. Sumner, 1980. "Comments on the Public-Sector Discount Rate: Response to Jenkins [Benefit-Cost Analysis in Canadian Practice]," Canadian Public Policy, University of Toronto Press, vol. 6(4), pages 648-650, Autumn.

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    More about this item

    Keywords

    Discount rates; economic appraisal; expenditure; public sector;
    All these keywords.

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate

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